Over half of the adviser firms that recommended significant volumes of Arch cru funds are no longer trading, according to estimates by a law firm involved in representing advisers.
This would see a large number of claims fall on the Financial Services Compensation Scheme if investors complain about their IFA as a result of the FSA’s £54m compensation package. The package is designed to offer investors 70 per cent of net asset value of their funds when the £400m range was suspended in March 2009 when combined with distributions already made and remaining assets. Investors can pursue IFAs for additional losses.
Regulatory Legal, which is planning to launch a judicial review of the FSA’s compensation package, expects significant claims will fall on the FSCS if the deal goes through. Partner Gareth Fatchett says: “We estimate just under 50 per cent of the 140-odd firms selling 90 per cent of Arch cru are trading today. On that basis, significant claims will be made to the FSCS.”
An FSCS spokesman says: “The FSCS has a duty to pay claims where they fall due and recognises the impact they can have on the industry due to the levy charge.”
Philip J Milton & Company managing director Philip Milton says: “It would be unfair of the FSCS to levy firms that did not sell Arch cru for compensation.”